By Cintia Amoros November 2, 2022
A quick google search will tell you that F.I.R.E. stands for Financial Independence Retire Early. According to Investopedia F.I.R.E. “is a movement of people devoted to a program of extreme savings and investment that aims to allow them to retire far earlier than traditional budgets and retirement plans would permit”.
The movement gained popularity among millennials, but it dates back to 1992 beginning with the book written by two financial gurus Vicki Robin and Joe Dominguez: Your money or your life. The book set up a nine steps program designed to change your relationship with money and ultimately achieve financial independence.
We can summarize the F.I.R.E. movement with two basic pillars:
- Save money and invest it (mainly) in the stock market
- Live from small yearly withdrawals (usually 3% to 4%) by reducing your expenses to the maximum
This may sound simple but there are a lot of considerations to be taken into account when deciding to join the F.I.R.E. lifestyle. No matter whether you are considering joining the movement or just curious about it, there are some fundamental principles of F.I.R.E. you can immediately start applying to your life for great benefits.
TEN PRINCIPLES OF F.I.R.E. THAT YOU SHOULD START APPLYING TODAY:
- PLANING IS EVERYTHING: The number one skill you need to master in order to achieve F.I.R.E. or anything you want in life for that matter is to be able to plan precisely, whether it is a lifetime budget or a detailed plan for a trip, the first key to achieving what you want is to be able to make a detailed plan.
- VOLUNTARY SIMPLICITY: One of the key principles of F.I.R.E. is that more is less. Voluntary simplicity is about choosing to live with less and lead a simpler life by choosing to reduce complexity and the amount of money you need to live to the minimum. By reducing what you need you will also reduce the number of hours you need to work for what you need. Voluntary simplicity is based on the principle that we actually need very little to live well.
- RESPONSIBLE INVESTING: Responsible investing takes a lot of research and patience but is a key principle and skill to master in your life. Investing does not always need to refer to the stock market, you can learn to invest in yourself or your own business but having a basic knowledge of how the stock markets work can bring you great benefits to your life, especially by starting early.
- CONTINUOUS LEARNING: Not only you should learn to invest wisely but you should understand that the more you learn to do on your own the less you depend on others and the more money you will save in the long run by having a do-it-yourself approach.
- PATIENCE: Patience is a key principle of F.I.R.E. and a critical life skill. Achieving financial independence takes time but mostly it takes patience and discipline. Most people lack these qualities rather than the financial possibility of eventually achieving F.I.R.E.
- BE READY FOR EMERGENCIES: In F.I.R.E. as in life, it is critical to be ready to cover emergencies. An unplanned emergency can derail you from your budget and send you into a debt spiral. This leads back to the first principle: PLANNING IS EVERYTHING.
- CREATE A MULTIPLE SOURCE INCOME:I.R.E. can be a complement to your financial strategy and not the only solution. But it can also be achieved much quicker if you rely on multiple sources of income rather than just one. The key is to be independent.
- TAKE CARE OF YOURSELF: In most countries, health care can be very expensive. By living a healthy lifestyle and by doing preventive checks you can reduce and possibly avoid many health problems and costs.
- TAKE CARE OF YOUR THINGS: Taking care of your things will save you money in the long run. Proper care and maintenance are fundamental not only for saving money but also for the planet. Taking care of your car maintenance for example will cost you a fraction of the cost of buying a new car.
- GEO ARBITRAGE: In simple terms, geo arbitrage means making money in one location and spending it in another one where your money stretches even further. This can be a way of reaching F.I.R.E. earlier but it can also be a way of enjoying more your money in the meantime.
Applying these basic principles of F.I.R.E. to your daily life could bring you great benefits and improve your financial well-being.
If you are interested in finding out more about the F.I.R.E. lifestyle and movement here are five books to get you started:
- Your money or your life. By Vicki Robin and Joe Dominguez. The book that started it all. Contains detailed recommendations and a nine-step program in order to help you achieve F.I.R.E.
- Playing with F.I.R.E. By Scott Rieckens. A detailed account of how to get started on F.I.R.E. with good examples and entertaining stories.
- I am out. How to make an exit. By Robert Wringham. It examines our relationship with corporate work and modern life and explores several alternatives including F.I.R.E.
- The art of non-conformity. By Chris Guillebeau. Will teach you about self-employment, a different approach to travel, minimalism, and how to change your spending habits.
- The four-hour work week. By Tim Ferris. Will give you a detailed account of how to set up an online business that you can live from.